E-Residency and e-companies for digital nomads in Andorra

The Andorran government caught a lot of interest from digital nomads around Europe as they have been considering implementation of an e-residency in Andorra to allow company set-up without physical residency. The Minister of Interior and Justice, Mr. Josep Maria Rossell has committed to study the viability of such a system following Estonia model of e-residencies. The small Baltic country has been very successful with their e-residency program geared to set up companies for e-ecommerce. Digital nomads that use the program do not need physical residence in the country. Simple registration and a set up for a small fee make this option so popular.

Now Andorra is certainly not the best example for a quick company set up, given that there is a lot of government red tape and restrictive compliance checks from the local banks. The process for a company setup in Andorra remains complex and time consuming. This is owed to screening for potential money laundering risks and sufficient substance requirements in the country. It seems contradictory after all the efforts made encouraging companies with substance in the country to now switch over to a 100% form of offshore operation.

E-residencies certainly pick up on the trend of digital entrepreneurs and nomads moving around the world without permanent residency in any country. However it remains to be seen how this can be harmonized with local banking compliance and OCDE proper substance standards for a company’s registered address.

Andorra Solution believes that simplified processes for company setups and an e-company model would be beneficial for Andorra as potential economic hub for digital companies. However anti-money laundering measures and monitoring tax liabilities for the beneficial owners of such companies are fundamental. Andorra wants to avoid negative press in this sense. Ensuring that beneficial owners of potential e-companies pay their taxes in their country of tax residency is not an easy task when it comes to people that move around all the time. The concept of digital nomads remains a complex issue as dividends distributed by an Andorran company ultimately are subject to taxation at the place of residency. Not having a tax residency and therefore not declaring any income tax may bring negative attention to Andorra that it wishes to avoid. Government and banks need to present clear rules of the game in order to avoid risks of making Andorra yet again a haven for tax evasion through a new loophole of e-residency.